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Mirror Trading International was a Bitcoin-based network marketing scam that began in South Africa and drew in members worldwide.
The Western Cape High Court has declared MTI an unlawful scheme.
In her ruling, acting High Court Judge Alma de Wet called it a pyramid and a Ponzi-type scheme.
Chainalysis named it the biggest cryptocurrency scam of 2020.
The exact size of the scheme has been a moving target. Previous court documents estimated that 29,421 bitcoins flowed through the scheme.
Sources with knowledge of the case told MyBroadband the actual number is closer to 46,000 bitcoins.
According to the US Commodity Futures Trading Commission (CFTC), MTI accepted at least 29,421 bitcoins from at least 23,000 individuals from the United States.
Most recently, Geldsake (Afrikaans wordplay “money-matters” or “money-business”) reported that around 39,000 bitcoins had been deposited into the scheme and 32,000 withdrawn — leaving a difference of roughly 7,000 bitcoin.
Regardless of which number you use, MTI is the biggest pyramid or Ponzi-like scheme in South Africa’s history.
Using the current bitcoin price of around R520,000, even the lower estimate values MTI at R15.3 billion.
The infamous Krion Ponzi scheme was valued at around R1.5 billion in 2009, while Travel Ventures International (TVI) was reportedly a R4 billion pyramid scheme.
The value of Africrypt is disputed, but the most realistic estimates valued the scheme at between R200 million and R1 billion.
MTI made headlines in September 2020 when a group calling itself Anonymous ZA exploited vulnerabilities in the scheme’s poorly-coded website.
Together with a MyBroadband investigative journalist and community members, the group exposed the inner workings of MTI.
In mid-December 2020, MTI CEO Johann Steynberg disappeared while travelling in Brazil, and MTI collapsed. Liquidation proceedings were instituted shortly after that.
Steynberg was arrested in Brazil on 29 December 2021 — almost exactly a year after he first went missing.
He is currently detained pending extradition proceedings and was recently found guilty of using a forged ID in Brazil and fined around R595,000.
Johann Steynberg arrested in Brazil in December 2021Assuming around 39,000 bitcoins were deposited into MTI and 32,000 withdrawn, not all of the remaining 7,000 bitcoins are unaccounted for.
By sheer stroke of luck, and with the help of the Financial Sector Conduct Authority, the liquidators recovered 1,281 bitcoins that MTI’s former brokerage, FXChoice, had frozen.
Applying established principles when handling non-rand assets in a liquidation, they immediately sold the Bitcoin on the cryptocurrency exchange Luno, banking close to R1.1 billion for the estate.
The serendipitous timing allowed the liquidators to receive a reasonably favourable rate, all things considered, of around R800,000 per bitcoin.
MyBroadband asked the liquidators about the 5,719 bitcoins that remain unaccounted for, and they said they would only be able to fully answer that question after concluding their investigation.
“We have investigated over 2,500 individuals to date based on the information in the database. These are accounts that have been audited,” the liquidators said.
“The structure and flow of funds had to be reconstructed on the blockchain by tracing member deposits and withdrawals as well as the source of those funds – this was done to understand how the BTC flowed, from where, when and how.”
The liquidators said this is time-consuming as they must comply with international regulations and other legal requirements, and be conducted with the assistance of the relevant local and international law enforcement agencies.
Earlier this year, MyBroadband saw a Provisional Liquidators Account, which showed that the liquidators had already spent R113,007,185.31 and provisionally set aside R135,017,551.60 as their fee for when the case was finalised.
The liquidators itemised R46,613,872.48 for legal expenses related to interrogations, investigations, and transcription.
Another R16,696,086.72 was paid for crypto investigation services.
Bester told Geldsake that in-depth investigations were necessary to determine the legitimacy of claims.
He explained that although MTI had a detailed database to run its online platform investors used, no FICA or “know-your-customer” was done when people opened accounts.
Because MTI offered highly lucrative referral bonuses, this resulted in people opening multiple accounts in the names of friends, family, and children — usually unbeknownst to them. Some secondary accounts were even opened in the names of pets.
To open an account, users only had to provide an email address or cellphone number.
This loophole allowed the scammers to scam the scam, as it were.
Ian McGinley, CFTC, Director of the Division of Enforcement“Our forensic experts, after a meticulous process of clustering, calculated an expected number of potential claims,” Bester said.
Bester said their analysis showed that, on average, there were around 13 fictitious accounts per actual user.
Therefore, of the over 200,000 accounts registered, only between 15,000 and 15,500 were individual investors.
This is substantially lower than the CFTC’s claim that at least 23,000 individuals in the US had participated in the scheme.
Asked for more details, the liquidators told MyBroadband they have received 7,903 claims to date and that they don’t expect claims from all 15,000 investors.
That’s because some of them would prefer to remain anonymous.
“Certain individuals use crypto as a money laundering channel or other dubious purposes,” the liquidators stated.
Some would have lost an insignificant amount of money they don’t feel is worth the effort, while others will be “net winners”.
“The expected dividend — previously estimated as between 50c to 60c in the rand — changes all the time as more claims is received,” the liquidators said.
“There will be more than one dividend payments as we continue with collections from winners who must repay their winnings,” they continued.
“This process will continue for at least another 2–3 years. The LND [Liquidation and Distribution] account is therefore updated regularly.”
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